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Verizon Wireless eliminates service contracts and device subsidies

Yesterday, Verizon Wireless—which had previously offered customers the option of purchasing service on a month-tomonth basis without a service contract—enacted plans announced last Friday to eliminate service contracts and wireless device subsidies for all new customers. In so doing, Verizon, the nation’s top mobile service provider by subscribers, becomes the most prominent carrier in the U.S. to forego traditional two-year service contracts, which have enabled subscribers to obtain subsidized wireless devices at low or no cost but which also carry hefty fees for early termination.

Verizon’s strategy follows the trail blazed in recent years by T-Mobile US which became the first national wireless carrier to switch entirely to no-contract and no-subsidy plans that give customers the opportunity to upgrade their devices as soon as their existing devices are paid off. Various other carriers have since followed the footsteps of T-Mobile although AT&T and Sprint continue to offer two-year service contracts along with no-contract options.

Under the new rate plans, Verizon customers will pay a monthly charge of $20 per line for smart phones (or $10 per line for tablets and “jetpack” hotspot devices) plus an additional charge of between $30 and $80 per month for shareable small, medium, large or extra-large data buckets that range in size from 1GB to 12 GB. All plans will include unlimited voice and text service, and customers will pay an extra $15 for every gigabyte of data that exceeds their monthly allowance. Customers will be required to pay the retail price for their wireless devices, either in full at the time of subscription or in 24 monthly installments. Although customers will not be locked into service contracts, subscribers who switch to another carrier will be required to pay off any balance that remains on their devices. Existing Verizon customers may keep their current plan or may switch to any of the new, no-contract plans subject to certain restrictions. Asserting that “choosing a wireless plan is now easier than ever,” Rob Miller, the vice president of consumer pricing for Verizon Wireless, told reporters that “a plan with small, medium, large and extra-large choices makes sense for the way people actually use their wireless service.”